Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Fundamental Accounting Equation

Financial Accounting

1. Introduction to Accounting

Fundamental Accounting Equation

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Multiple Choice

Which term best describes the situation when a business recognizes revenue as it is earned and expenses as they are incurred, regardless of when cash is received or paid?

Modified cash basis accounting

Accrual basis accounting

Single-entry accounting

Cash basis accounting

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Verified step by step guidance

Understand the concept of revenue recognition and expense matching: In accrual basis accounting, revenue is recognized when it is earned (not necessarily when cash is received), and expenses are recognized when they are incurred (not necessarily when cash is paid). This principle ensures that financial statements reflect the true economic activity of the business.

Compare accrual basis accounting with cash basis accounting: Cash basis accounting recognizes revenue only when cash is received and expenses only when cash is paid. This method does not account for transactions where cash has not yet been exchanged, which can lead to misleading financial results.

Consider modified cash basis accounting: This is a hybrid approach that combines elements of both accrual and cash basis accounting. It may recognize certain transactions on an accrual basis while others on a cash basis, but it is not as comprehensive as accrual basis accounting.

Understand single-entry accounting: Single-entry accounting is a simpler bookkeeping method that records only one side of each transaction. It does not provide the detailed financial information required for accrual basis accounting.

Conclude that accrual basis accounting is the correct term: Based on the explanation, accrual basis accounting best describes the situation where revenue is recognized as earned and expenses as incurred, regardless of cash flow timing.